Merck and ERISA: Did Vytorin Constitute a Violation?

Whitehouse Station, NJMerck's role in the alleged delay of the ENHANCE study that ultimately revealed the truth about Vytorin, may have served to mislead more than the drug-buying public. The two-year wait for the truth about the anti-cholesterol drug may have also served to pull the wool over the eyes of those Merck employees, and investors in various Merck employee savings plans and 401(k) plans incurring huge losses.

In so doing, Merck may have breached its fiduciary duties according to ERISA guidelines.

For two years Merck and its Vytorin partner Schering-Plough were aggressively marketing Vytorin as the gold standard of cholesterol drugs. Vytorin was the combination of Schering-Plough's Zetia, and Merck's Zocor—a statin—that had come off patent two years prior.

The alleged skullduggery comes into play with the ENHANCE trial, which was a study involving 750 patients that found Vytorin, while significantly lowering the vilified LDL cholesterol levels in the bloodstream, was shown to have little impact with regard to the amount of plaque build-up in the arteries.

This would represent a major failing of the drug, and would certainly hurt sales once the medical community, and ultimately the drug-buying public weighed in on the findings. However those findings, available as of April 2006, were delayed two years while the manufacturers, it is claimed, waded through tens of thousands of images generated from the study.

However, critics allege that the manufacturers were stalling, while continuing to aggressively market Vytorin to spur sales. It wasn't until mounting pressure from Capitol Hill forced the eventual release of the ENHANCE study, which was finally made public in preliminary form in January of this year, that the medical community, consumers and investors knew the truth inherent with Vytorin.

The release of the full study at the end of March confirmed what people already suspected, and what many already knew: that Vytorin was not effective, and there were still too many unanswered questions for the drug to enjoy such vaulted status.

Thus, the bloom was off the rose and the wind was gone from the sails. Not surprisingly, Merck & Co stock price spiraled at the news, and investors are said to have incurred massive losses. The value of stock, together with the asset values of a collection of Merck investment, savings, retirement and 401(k) plans, had dropped significantly.

Whether or not it will ever be proven that the proponents of Vytorin deliberately withheld the ENHANCE study in an effort to drive sales and keep the stock value healthy, or were genuinely overwhelmed by the task of sifting through the data, the fact remains that data unfavorable to the effectiveness and efficacy of Vytorin was in their hands while Vytorin was still being aggressively marketed, and investments in Merck savings and 401(k) plans were still being sought, and accepted.

Had employees, former employees and investors of Merck been aware of the red flags surrounding Vytorin prior to January of this year, would they have chosen to invest in the company so willingly? Or would they have sought alternatives in an effort to mitigate the fallout once the Vytorin saga was made public?

And were the managers, and administrators of the Merck investment, retirement and 401(k) plans living up to their fiduciary duties with regard to the Plans, in the face of certain facts that would eventually prove damaging to the company's stock performance, and that of its investors?

That's the question now being investigated. According to the Employee Retirement Income Security Act (ERISA, as amended) those responsible for the prudent management of employee investment plans have a fiduciary duty to manage those investments in the best interests of the investors. The continuance of investing into Merck plans when it was no longer prudent to do so, given the data available in the yet-to-be-released ENHANCE study, may have constituted a breach under ERISA.

Such a breach could allow investors having incurred losses, to pursue compensation in the courts.